MAXLINEAR TO ACQUIRE EXAR March 29, 2017
DISCLAIMER Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including statements with respect to the anticipated timing of the proposed tender offer and merger; anticipated effects of the proposed tender offer and merger; prospects for the combined company, including (without limitation) expectations with respect to its addressable markets, opportunities within those markets, and the ability of the combined company to serve those markets; the growth strategies of MaxLinear generally and expectations with respect to the impact of the acquisition on MaxLinear’s growth strategies; expectations with respect to the products and customers of the combined company after the proposed tender offer and merger; strategic and financial synergies anticipated to be realized from the proposed tender offer and merger; and expectations for operating results of MaxLinear and Exar for their quarters ending March 31, 2017 and April 2, 2017, respectively. These statements are based on management’s current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Forward-looking statements may contain words such as “will be,” “will,” “expected,” “anticipate,” “continue,” or similar expressions and include the assumptions that underlie such statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: failure of the Exar stockholders to tender their shares in connection with the tender offer; failure to receive regulatory approvals; the challenges and costs of closing, integrating, restructuring, and achieving anticipated synergies, particularly in light of differences in the businesses and operations of the two companies; the ability to retain key employees, customers and suppliers; and other factors affecting the business, operating results, and financial condition of either MaxLinear or Exar, including those set forth in the most recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K reports filed by MaxLinear and Exar, as applicable, with the Securities and Exchange Commission (the “SEC”) . All forward-looking statements are based on the estimates, projections, and assumptions of MaxLinear or Exar management, as applicable, as of the date hereof, and MaxLinear and Exar are under no obligation (and expressly disclaim any such obligation) to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. Additional Information and Where to Find It In connection with the proposed merger, MaxLinear and its subsidiary will commence a tender offer (the “Offer”) and file a Tender Offer Statement on Schedule TO with the SEC, and Exar will file a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC. EXAR STOCKHOLDERS AND OTHER INVESTORS ARE URGED TO READ THE OFFER MATERIALS (INCLUDING THE OFFER TO PURCHASE, RELATED LETTER OF TRANSMITTAL, AND CERTAIN OTHER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION STATEMENT, INCLUDING ALL AMENDMENTS TO THOSE MATERIALS. SUCH DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION, WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE TENDER OFFER. The Tender Offer Statement and the Solicitation/Recommendation Statement will be available without charge at the SEC’s website at www.sec.gov. Free copies of these materials and certain other offering documents will be sent to Exar’s stockholders by the information agent for the Offer. These documents may also be obtained for free by contacting MaxLinear Investor Relations at http://investors.maxlinear.com/, at IR@MaxLinear.com or by telephone at (760) 517-1112 or by contacting Exar Investor Relations at www.investorrelations@exar.com or by telephone at (510) 668-7201. The contents of the websites referenced above are not deemed to be incorporated by reference into the Offer documents. Non-GAAP Financial Measures This communication may contain certain non-GAAP financial measures, which MaxLinear management believes are useful to investors and others in evaluating business combinations. Further detail and reconciliations between the non-GAAP financial measures and the GAAP financial measures are available in the Appendix to this presentation. 2
CREATING ANALOG, MIXED-SIGNAL AND RF PLATFORM LEADERSHIP CY16 Pro Forma ($ in millions) ($15M of Synergies) (Non-GAAP) Revenue $388M $107M $495 Gross Margin 63% 52% 61% Operating Margin 32% 12% 30% Adj. EBITDA Margin 34% 16% 33% Adds attractive analog Significantly expands addressable product portfolio market (doubles MXL SAM) Numerous cross-selling opportunities Increases revenue scale & accretive into Exar’s distribution channel EBITDA Margin to non-GAAP EPS and free cash flow Note: Please see appendix for non-GAAP reconciliation. Note: Exar CY16 based on financial data from continuing operations (excludes iML). 3
HIGHLY COMPLEMENTARY BUSINESSES – TECHNOLOGY, MARKETS AND SALES CHANNELS Enhanced Tech CMOS and mixed-signal integration Comprehensive interface and power • • and high-performance RF and DSP management solutions Capabilities Broadband operators (cable/satellite) Datacom • • Diversified End Markets & Wireless, optical, telecom and Switches / Routers • • Datacom infrastructure Platforms Industrial & Automotive • ~1,400 issued and pending patents ~190 issued and pending patents • • Expanded Diversified global R&D centers Established Silicon Valley R&D • • IP & Team presence 81% direct sales 13% direct sales • • Strengthened 19% sales through distributors 87% sales through distributors • • Sales Channel 4
TRANSACTION OVERVIEW Purchase $13.00 per share all-cash to acquire 100% of Exar • Price Equity value: ~$700M • Value Enterprise value: ~$472M, net of Exar cash acquired • $425 million of new committed debt financing • Financing Projected LTM gross debt / EBITDA of 2.6x at closing, including synergies • Immediately accretive to non-GAAP EPS and free cash flow • Synergy $15 million of annualized cost synergies within 12 months of closing • Expected to close by the end of the second calendar quarter of 2017 • Closing and Subject to customary regulatory approvals and closing conditions • Approvals Certain stockholders, directors & officers signed support agreements (~20% of shares) • 5
HIGHLY PROFITABLE FINANCIAL MODEL WITH $15M IN PROJECTED SYNERGIES WITHIN TWELVE MONTHS OF CLOSING ($ in millions) (Non-GAAP) Proven track record of • CY16 PF CY16 PF NewCo revenue growth NewCo w/ Synergies Revenue $388 $107 $495 $495 $15M of projected • annualized cost Gross Margin 63% 52% 61% 61% synergies OPEX% 31% 40% 33% 30% $165M in EBITDA for • CY2016 with synergies Operating Income 123 13 135 150 Op. Income Margin 32% 12% 27% 30% Strong cash flow • EBITDA 134 17 150 165 generation EBITDA Margin 34% 16% 30% 33% Note: Synergy case assumes $15M of annual pre-tax synergies. Note: Exar CY16 based on financial data from continuing operations (excludes iML). Note: Please see appendix for GAAP to non-GAAP reconciliation. 6
FINANCIAL BENEFITS AND SYNERGIES Organic Exar Exar new product ramps in power, interfaces and force touch interface offer • Revenue growth potential consistent with MXL’s long -term target CAGR of 15% - 20% Wall Street consensus estimates project ~16% revenue growth in CY2017 Growth • R&D leverage for strategic platforms • Opex Reduced G&A, sales and marketing and other organizational synergies • Synergies Elimination of Exar’s public company costs • COGS Reduced wafer cost due to higher volumes • Synergies Reduced assembly and test costs • Exar had approximately $250M of federal net operating losses as of 12/31/16 • Net Operating Subject to Section 382 limitations, MaxLinear expects to utilize these to offset • Losses taxes Note: Exar CY16 revenue based on financial data from continuing operations (excludes iML). 7
TRANSACTION DEBT FINANCING $425 million Term Loan B facility • No maintenance covenants • Credit Facility Committed to debt paydown through both free cash flow and other significant • sources of cash made available through integration activities Expected Leverage Multiples at Closing ($ Millions) With $15M Synergies Without Synergies Pro Forma Gross Debt $425 2.6x 2.8x Capitalization Statistics Cash $75 0.5x 0.5x Net Debt $350 2.1x 2.3x 8
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